March 16, 2004

What is Unrestricted Economic Warfare?

You may be wondering what I meant when I said there was a deliberate economic attack on America. Well, truthfully, it's not all that controversial or unusual. It's just that Americans don't think about economic competition in combative terms. The American conception of capitalism is that it's value neutral and beneficent, bestowing on all participants the benefits of rising wages, living standards, and personal security. That probably seemed especially true when Americans had the highest wage jobs in the world, produced the world's manufactured goods, and were net creditors. The world is different today. China manufactures. India has a growing services industry. Nearly every industrialized country is capable of producing cheap manufactured goods. There is a great deal of economic parity. Which is another way of saying the world is highly competitive. This is good for consumers. It means prices for consumer goods tend to stay low, or even fall. But national governments see it in a different light. They have trade policies to manage, and currencies. This makes nation states much more likely to view economic competition in a more...combative light. Rather than competing in some ideal free market state, nation States are more likely to employ a wide variety of policies, most quite legal, to preserve or enhance their competitive advantage. This isn't an entirely new line of thinking. The U.S. government has used farm subsidies and more recently, steel subsidies, to curry favor with domestic political constituencies. However, there's a much broader variety of economic tactics a nation state can employ to try and gain an economic edge. The Chinese--at least their military thinkers--have already put some thought into this. More on this in the April issue. For now, an excerpt below from "Unrestricted Warfare." Emphasis added is mine. Some terrorist organizations pursue political objectives by combining means such as throwing bombs, taking hostages, and making raids on networks. To stir up the waters and grope for fish, the likes of Soros combine speculation in currency markets, stock markets, and futures markets. Also they exploit public opinion and create widespread momentum to lure and assemble the "jumbos" such as Merrill Lynch, Fidelity, and Morgan Stanley and their partners [19 ]to join forces in the marketplace on a huge scale and wage hair-raising financial wars one after the other. Most of these means are not by their nature military (although they often have a tendency to be violent), but the methods by which they are combined and used certainly do not fail to inspire us as to how to use military or non-military means effectively in war. This is because nowadays, judging the effectiveness of a particular means is not mainly a matter of looking at what category it is in, or at whether or not it conforms to some moral standard. Instead, it mainly involves looking at whether or not it conforms to a certain principle; namely, is it the best way to achieve the desired objective? So long as it conforms to this principle, then it is the best means. Although other factors cannot be totally disregarded, they must fulfill the prerequisite that they be advantageous to achieving the objective. That is, what supra-means combinations must surpass is not other [means], but rather the moral standards or normal principles intrinsic to the means themselves. This is much more difficult and complex than combining certain means with certain other means. We can only shake off taboos and enter an area of free choice of means -- the beyond-limits realm -- if we complete our picture of the concept of beyond-limits. This is because for us, we cannot achieve objectives merely by way of ready-made means. We still need to find the optimum way to achieve objectives, a correct and effective way to employ means. In other words, to find out how to combine different means and create new means to achieve objectives. For example, in this era of economic integration, if some economically powerful company wants to attack another country's economy while simultaneously attacking its defenses, it cannot rely completely on the use of ready-made means such as economic blockades and trade sanctions, or 195 military threats and arms embargoes. Instead, it must adjust its own financial strategy, use currency revaluation or devaluation as primary, and combine means such as getting the upper hand in public opinion and changing the rules sufficiently to make financial turbulence and economic crisis appear in the targeted country or area, weakening its overall power, including its military strength. In the Southeast Asian financial crisis we see a case in which the crisis led to a lowering of the temperature of the arms race in that region. Thus we can see the possibility that this will happen, although in this case it was not caused by some big country intentionally changing the value of its own currency. Even a quasi-world power like China already has the power to jolt the world economy just by changing its own economic policies. If China were a selfish country, and had gone back on its word in 1998 and let the Renminbi lose value, no doubt this would have added to the misfortunes of the economies of Asia. It would also have induced a cataclysm in the world's capital markets, with the result that even the world's number one debtor nation, a country which relies on the inflow of foreign capital to support its economic prosperity, the United States, would definitely have suffered heavy economic losses. Such an outcome would certainly be better than a military strike.


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